Shariah Compliant Macaulay’s Duration Model Testing: Evidence from Islamic banks in Indonesia

35 Pages Posted: 28 May 2021

See all articles by Dr. Syed Alamdar Ali Shah PhD (Hons) PostDoc

Dr. Syed Alamdar Ali Shah PhD (Hons) PostDoc

Airlangga University, Faculty of Economics, Islamic Economic Study Program, Students

Raditya Sukmana

Airlangga University

Bayu Arie Fianto

Airlangga University - Faculty of Economics and Business

Date Written: May 27, 2021

Abstract

The purpose of this research is to test Shariah compliant duration models on Islamic banks in Indonesia. This will be achieved using data of earning assets and risk bearing liabilities of Indonesian Islamic banks from 2009 to 2019. Using multiple regressions the results suggest that Shariah compliant duration models are robust to calculate duration of earning assets, return bearing liabilities and Islamic banks. This research adds to the previous research of testing Shariah compliant duration model. Ultimately, it will improve profitability, risk efficiency and Shariah efficiency by improved Shariah compliant measures of risk management. This will ultimately improve market capitalization and returns stability in the long run. A major limitation of the study is very short length of data of Islamic banks. Still another limitation is difference in commencement of business of various Islamic banks that makes length of data unequal.

Keywords: Islamic Banks, Earning Assets, Return Bearing Liabilities, Duration Model, Maturity Gap Risk Management model testing

JEL Classification: C32,C33,C34,G21,G28,P43

Suggested Citation

Shah PhD (Hons) PostDoc, Dr. Syed Alamdar Ali and Sukmana, Raditya and Fianto, Bayu Arie, Shariah Compliant Macaulay’s Duration Model Testing: Evidence from Islamic banks in Indonesia (May 27, 2021). Available at SSRN: https://ssrn.com/abstract=3855063 or http://dx.doi.org/10.2139/ssrn.3855063

Dr. Syed Alamdar Ali Shah PhD (Hons) PostDoc (Contact Author)

Airlangga University, Faculty of Economics, Islamic Economic Study Program, Students ( email )

Indonesia

Raditya Sukmana

Airlangga University ( email )

Jl. Darmawangsa Dalam 2
Surabaya, 60286
Indonesia

Bayu Arie Fianto

Airlangga University - Faculty of Economics and Business ( email )

Airlangga 4-6
Surabaya, East Java
Indonesia

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